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Microsoft's Wilsonville Jobs Are Going To China, Underscoring Travails of Domestic Tech Manufacturing (oregonlive.com) 149

An anonymous reader tips us a story: Just two years ago, Microsoft cast its Wilsonville factory as the harbinger of a new era in American technology manufacturing. The tech giant stamped, "Manufactured in Portland, OR, USA" on each Surface Hub it made there. It invited The New York Times and Fast Company magazine to tour the plant in 2015, then hired more than 100 people to make the enormous, $22,000 touch-screen computer. But last week Microsoft summoned its Wilsonville employees to an early-morning meeting and announced it will close the factory and lay off 124 employees -- nearly everyone at the site -- plus dozens of contract workers. Panos Panay, the vice president in charge of the Surface product group, traveled from corporate headquarters in Redmond, Washington, to tell the staff that Microsoft was moving production to the same place it makes all other Surface products. Though workers present say he didn't disclose the location, Microsoft has previously said it makes its other Surface computers in China. The company hasn't explained, in public or to its Wilsonville employees, why it gave up on domestic manufacturing so quickly and didn't respond to repeated inquiries for comment. But the only thing surprising about Microsoft's decision is that it tried to make its computers in the U.S. in the first place.
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Microsoft's Wilsonville Jobs Are Going To China, Underscoring Travails of Domestic Tech Manufacturing

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  • by Anonymous Coward

    Frankly, there needs to be some compromise in the government. Let workers unionize, but also slap 300% tariffs on companies that do this.

    • by rtb61 ( 674572 )

      I have a better solution and I could pretty much gaurantee it would work, stop fucking making windows devices at that plant and start making Android ones, I fucking bet it would work and not only would everyone keep their job, I'd bet you could expand the plant but oh no Windows anal probe 10 must invades everyone's privacy. I bet that would sell more surface as Android or even Linux than as Windows bloody 10.

  • by Anonymous Coward
    maybe one day they will accept that.
  • What this is (Score:5, Insightful)

    by fubarrr ( 884157 ) on Wednesday July 19, 2017 @12:40PM (#54840595)

    What this is is a hard landing for "Manufacturing 4.0" advocates and dotcom monkey.

    NO mater how much robots you put to screw a screw, you robots can't compete on cost with Chinese.

    While labour costs in China are nowhere near being laughable as they were a decade ago, they still outcompete any Western high tech manufacturer. Western manufacturers have no trouble getting orders from DoD to make banal power converters for 10k a pop. Why would they even try competing with Chinese?

    Making a top tier factory is a no joke enterprise that takes years, billions, patience, and serious people. You can't simply roll $10 billion USD and have a TSMC-level fab delivered by mail order, nobody in the world will do it for you. It is only possible for an entrepreneur who is ready to spend his life sitting butt naked on an ant pile, building a company along with its technology base - each TSMC fab is a miracle, a work of art, a creation, not something anybody in the world will teach to build or run

    • Why do you assume it is the labor costs of running the factory instead of the management? I am sure that the building of the TVs is the easy part, running the rest of it, you cannot do that with spreadsheets.

      I have seen more than my fair share of people who cannot even manage their own time, Handle a manufacturing timeline for coordinating parts to be delivered and assembling a product?In this case, the Chinese probably have more practical experience in running a factory, irrespective of the labor costs.

      • Yes, cost is certainly not the only thing where Chinese outcompete the West hands down: Chinese managers are raised on assembly lines, and not imported with near zero experience from Ivey league schools right after the graduation

    • Re:What this is (Score:5, Informative)

      by TechyImmigrant ( 175943 ) on Wednesday July 19, 2017 @01:36PM (#54841005) Homepage Journal

      >NO mater how much robots you put to screw a screw, you robots can't compete on cost with Chinese.

      This is wrong. You can't compete with the Chinese on flexibility and responsiveness in manufacturing. Well you could, but you would have to get a lot better at it and have the government on your side. The Chinese chose to be good at manufacturing and in particular contract manufacturing and they have a large infrastructure dedicated to that. Chinese labour costs are lower than the US, but that only counts for labour intensive manufacturing.

      Cost is one thing. Dealing with a million other crappy things is also a differentiator. My wife gets yarn manufactured around the world and imports it to be sold in yarn stores. It is substantially easier in terms of red tape, to get it made in China and import it than it is to get it made in Washington state and delivered to an address in Oregon. Also, the best makers of bamboo yarn are in China so it's not question that we would get that made in China. It's work to get them to manufacture to our packaging standards and in configurations that work for US markets, but that's easy compared to dealing with the tax departments of 50 US states. The highest quality yarn maker in the world is in the UK. Their stuff is costly more due to shipping from the UK than from the cost of manufacture. I've seen their factory floor and from processing incoming unprocessed sheared wool, to spinning to coning or balling involved 4 people.

      • Funny that you mention yarn. I live near the NC/SC border, and in SC, there's about 4 or 5 large buildings dedicated to textile manufacturing that have popped up in the past decade or so. Several of them even have foreign owners as shown by the Chinese letters (Keer) and then there's the old mainstays like Springs. Historically the Carolinas had a large textile industry, but it was weird seeing the jobs come back to the area under a Chinese overlord.

        • I suspect, without being able to give details right now, that this is related to the byzantine tax and tariff laws the US has on importing. E.G. the tax on yarn short than 6" is very different to importing yarn that is longer. This is because of some protectionist lobbying in the past by carpet manufacturers. That's only one example. It is very, very complicated. Doing later stage processing in the US , lets you import the goods in a different form. Much like assembling foreign components in the US is for c

  • This has little to nothing to do with American manufacturing. The product was a joke, I doubt it sold in quantities large enough to make it even worth anything. Nobody is paying $22K for a 55" TV with touchscreen.

    I bet the only ones they sold were to cable news channels as that's the only place I've ever seen them.

    • The 55" is $9k, the 84" is $22k.
      • And companies are definitely buying this stuff. We have a bunch at our offices, not MS though but I'd imagine they cost about as much.

        In any case, it's just over a hundred jobs so hardly important overall when we just heard [cnbc.com] that MS is laying off thousands of employees in other areas, in particular sales. Would be interesting to know what motivated the decision anyway though.

        • And companies are definitely buying this stuff. We have a bunch at our offices, not MS though but I'd imagine they cost about as much.

          In any case, it's just over a hundred jobs so hardly important overall when we just heard [cnbc.com] that MS is laying off thousands of employees in other areas, in particular sales. Would be interesting to know what motivated the decision anyway though.

          This is how US corporations breath. They expand and contract over time, accreting new projects and products and groups. Then the CEO gets a boner for efficiency and all the satellite offices and pet projects and stupid low volume products get axed. Then it starts all over again. Remaining employed in a large US corporation is partly a matter of not being in one of the dispensable limbs when it comes to chopping time.

  • by fahrbot-bot ( 874524 ) on Wednesday July 19, 2017 @12:47PM (#54840639)

    The profit margin on the $22k Surface Hub wasn't quite high enough using U.S. employees.

    Don't be fooled by your company's slogans; "profits" not "employees" are the company's most valuable asset. Remember what Veronica said in Better Off Ted (S1 E4: "Racial Sensitivity"), which was refreshingly honest:

    "Money before people," that's the company motto. Engraved on the lobby floor. It just looks more heroic in Latin.

    [ And, no, I'm not against companies making money, but there's more to it than that. ]

    • That show, Better off Ted, was great.
    • by AmiMoJo ( 196126 )

      The issue is probably not labour cost, it's likely supply. If you want to make a device like the Surface Hub, you need a massive LCD panel for a start. So either you carefully ship some massive LCD panels all the way from the factory in China/Korea/Japan or you just assemble the whole thing over there into a handy protective chassis. And if one panel fails QA you just get your supplier to send another one overnight.

      It's a cascade failure. Once you get rid of a few key suppliers in one country, it becomes mu

  • by SuperKendall ( 25149 ) on Wednesday July 19, 2017 @12:53PM (#54840687)

    Microsoft tried to make some Surface units in the U.S. because they thought of it as marketing.

    Microsoft has ended the local manufacturing because the marketing doesn't seem to be returning the cost of the effort.

    In short, Microsoft never actually cared about helping to regain some manufacturing in the U.S. They just wanted to *look* like they cared. None of it is a surprise in any way.

    • Re: (Score:2, Troll)

      by Kaenneth ( 82978 )

      Trumpsters /say/ "Buy American!" then go shopping at Wal*Mart.

    • Again, manufacturing in the US wasn't a Microsoft idea. The Surface Hub is just a relabled Perceptive Pixel touchscreen; Microsoft got the factory when they bought out Perceptive Pixel. They were just waiting for the right time to shift the manufacturing to China, where Microsoft manufacturers every other piece of hardware it sells.
  • There are PLENTY of poor American in West Virginia and eastern Ohio who can work cheap.

    It isn't the USA that is unaffordable, it is the coasts and cities that are unaffordable.

  • It may simply be the case that Wilsonville's capacity can't meet the demand. You can't even buy a Hub on the Microsoft store right now, and Ars wrote [arstechnica.com] that MS was caught off guard by the popularity.

  • by xxxJonBoyxxx ( 565205 ) on Wednesday July 19, 2017 @01:06PM (#54840795)
    >> The company hasn't explained, in public or to its Wilsonville employees, why it gave up on domestic manufacturing so quickly

    I'm guessing the factory was built to collect an Oregon tax credit or to otherwise mollify some state-level lawmakers. Now that the tax credit has been cashed in (or related legislative/regulatory policy has been created/averted), it's time to pull the plug.

    Or maybe this was just the minimum time required to figure out and outsource all manufacturing. There's a June 2015 NYTimes article which pretty much said the same when the factory opened (via acquisition):

    "Mr. Hix had a downbeat assessment for what would happen to the manufacturing of the Surface Hub if the product took off and the production process was refined. 'Once they get all the problems out of it, it will go offshore,' he said."

    https://www.nytimes.com/2015/06/11/technology/microsoft-picks-unusual-place-to-make-its-giant-touch-screen-the-us.html
    • Oregon has always been a hub for high tech manufacturing (at least in the past it has) there's a lot of expertise and know-how here. Specifically Wilsonville is where Tektronix used to manufacture a lot of goods (including the Phaser printer) and where Mentor Graphics also spun off from Tek. Nearby Hillsboro is where Intel makes/designs a lot of components as well. Also somewhat nearby (within 2 hours) is where HP-Corvallis manufactured a huge amount of electronics including the HP wristwatch, and most all

      • HP has completely abandoned the Corvalis campus, as far as I know. Nice campus, hopefully many other tech companies are leasing space there now.
    • by Locke2005 ( 849178 ) on Wednesday July 19, 2017 @03:50PM (#54841973)
      The factory was inherited from Perceptive Pixel when they bought them out, not built by Microsoft. Was Perceptive Pixel doing manufacturing in Wilsonville for tax credits? Probably. I worked there, and all other hardware Microsoft sold was manufactured in China, including the pens used with the touch screen. So I frequently wondered when they were going to move the touchscreen manufacturing itself to China. Problem was, they had to fill the warehouses with unsold product first, so they could afford to shut down for a couple months to move product without impacting availability of the product. About the time I left a couple months ago, the warehouses were full to capacity, and the double shifts were being phased out.
  • cable news channels as that's the only place I've ever seen them

    and on NCIS re-runs. Investigations into homicides and counter-terrorism; but the show seemed pretty convincing as a career that won't get outsourced, believe it or not.

  • Companies move manufacturing offshore due to labor costs. Less labor cost, more profit. Since the 80s, employees have been considered liabilities or cost sinks rather than assets.

    Companies who hype up domestic manufacturing attempts are most likely doing it for the PR. Google did it when they opened the Motorola plant in Texas.

    • Obvious solution: increase the transportation costs so that it costs more to ship the raw materials to China and finished good back to the US than they can save on labor costs. This has actually worked for the North Carolina furniture industry; apparently shipping costs exceed labor costs so now the furniture manufacturing is coming back to the state.
  • by Impy the Impiuos Imp ( 442658 ) on Wednesday July 19, 2017 @01:42PM (#54841031) Journal

    "Why???"

    "Well, Donald Trump wants us to stay, so we've gotta go."

  • by ErichTheRed ( 39327 ) on Wednesday July 19, 2017 @01:57PM (#54841135)

    Dealing with technical people all the time, it never ceases to amaze me how few understand life outside their little comfort zone. Any time they have to deal with someone who's lower-skilled than themselves, it's an annoyance and they run back to their crowd as soon as they can. Just like a lot of people say everyone should have at least one menial job serving food, working retail or otherwise dealing with the public, I think it would do smart people a world of good to put in some time working in a social services office. Doing so may reveal to smart people that the vast majority of the world is not like them, and may convince them that we shouldn't shoot for 100% optimization if that leaves out a huge swath of the population.

    The truth is that we need something at the level of a manufacturing job, that delivers a lower-middle class salary, has regular hours and can be done by people of average intelligence. I know AI is being overhyped now, but the vast majority of white collar corporate jobs are up for replacement next as well. Unless you want society to break down, you're going to need to give people jobs. I grew up in a Rust Belt city and watched every large factory move to the South or overseas, leaving a burnt-out shell of a city. Not Detroit-level, but it's only now coming back. You need employers like this to give work to the masses who can't be big data scientists or work in engineering.

    Feel free to call me a Luddite, but leaving some slack in the system will be the only way to preserve it. We're at the point where people can't just move up to the next better job when automation takes theirs. For better or worse, most people are doing the equivalent of factory work, including corporate types.

    • Feel free to call me a Luddite, but leaving some slack in the system will be the only way to preserve it.

      Why should we want to preserve the system? I would rather have my tax money spent on enabling people to give up meaningless jobs and paint, sing, dance, write, garden, hike, bike, paddle, or do whatever else floats their boat instead.

      • by Anonymous Coward

        The people who still have to work will never allow this. It's a great idea, but only works if everyone doesn't have to work. The second that's not the case, you'll have massive resentment of those who can do their own thing by the ones who are stuck doing a job someone needs to do.

        • by Anonymous Coward

          Easy solution. Everyone work less. Twenty hour weeks and there is work for twice as many.

  • Thanks, Trump! (Score:4, Informative)

    by Locke2005 ( 849178 ) on Wednesday July 19, 2017 @03:36PM (#54841857)
    My previous job was actually working at the Wilsonville factory on the software used to test the Surface Hub before it was shipped. All the factory workers were temps hired through Kelly Services. Almost all of them looked like immigrants to me. They put on double shifts in order to fill the warehouses with unsold product, so now they can shut down for a couple months while they shift production elsewhere. Why were they doing production in the US in the first place? Microsoft got the Surface Hub by buying out Perceptive PIxel, which was manufacturing it's large touchscreen in the same building Microsoft is now shutting down. Also, there was never enough parking at the plant; it was designed as a shipping warehouse. So the city of WIlsonville didn't allow us to use the entire upstairs portion of the building, since there wasn't parking for employees. Kelly services leased 2 buses to bus in factory workers from whereever they had them park.
  • Home of the "American Standard" plumbing manufacturing company!
  • by Anonymous Coward
    Final assembly of a product is merely one link in the supply chain. If you want that chain to run smoothly you group as many of those links as closely together as possible.
  • Just two years ago, Microsoft cast its Wilsonville factory as the harbinger of a new era in American technology manufacturing.

    It is true - It was a harbinger. Just not the way people thought it was.

  • Microsoft has become like the old IBM. Sell 'reasonably' priced clients, sell lockins to powerful servers to get your work done, 'innovate' exceptionally pricey hardware... But then, there is their XBox division. Hmm...

  • Always Be Evil(sm)

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